June 28, 2013

Price-cut battle shelves Shaw's rewards card

The grocer switches to discounts on hundreds of items, like Hannaford, as both face increased competition for shoppers.

By Edward D. Murphy emurphy@pressherald.com
Staff Writer

SOUTH PORTLAND – In a sign of growing competition in the grocery industry, Shaw's said Thursday that it is dropping its rewards card program and cutting prices on thousands of items in its supermarkets.

click image to enlarge

Shaw's is doing away with its rewards card. Photographed Thursday, June 27, 2013.

Gabe Souza / Staff Photographer

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In this November 2012 file photo, Shaw's grocery store at Northgate Plaza in Portland.

John Ewing / Staff Photographer

Hannaford Supermarkets introduced a price-cutting program last week, with Market Basket, a Massachusetts-based chain noted for its low prices, preparing to open a store this summer in Biddeford to compete with Shaw's and Hannaford.

Shaw's is seeking to relaunch itself, touting a "You're in for Something Fresh" advertising campaign. It is the first major marketing change for the company, which has 22 stores in Maine, since it was bought in January by Cerberus Capital Management, along with three other grocery chains.

Shaw's and Hannaford face increased competition from retailers that are taking a bigger share of the grocery market.

While chains like Trader Joe's and Whole Foods offer specialty high-end items, department, drug and discount stores are selling more groceries. A survey last year indicated that more than half of grocery purchases no longer occur in traditional supermarkets.

Market Basket's store in Biddeford, its first in Maine, will put more pressure on established chains like Shaw's and Hannaford to hang on to customers. Market Basket is the first chain to enter Maine since Trader Joe's arrived in Portland in 2010.

Hannaford, which has resisted retailers' trend toward rewards cards, said last week that it is lowering prices on a broad range of items.

Mike Norton, a spokesman for Scarborough-based Hannaford, said prices were cut on about 4,500 items.

He said the company looked at a random shopping cart of weekly groceries for a family, and it indicated savings of nearly 16 percent -- $206 compared with $245 under the previous pricing.

Steve Sylven, a spokesman for Shaw's, could not provide information Thursday on how many rewards cards Shaw's issued, and declined to provide specifics about its price reductions, citing competitive reasons.

Shaw's already competes heavily with Market Basket in Massachusetts. Hannaford began facing more competition from Market Basket in recent years as Market Basket moved into New Hampshire.

Shaw's laid off 700 employees in November, two months before the sale to Cerberus. It used to operate in all six New England states, but has pulled back in recent years and closed its stores in Connecticut. The chain, based in West Bridgewater, Mass., still has a strong presence in Greater Boston.

"Shaw's is under intense pressure," said Mike Berger, senior editor of the Griffin Report of Food Marketing, which follows the supermarket industry. "The competition is sharper and keener than it was even a few years ago."

Berger said the Shaw's move to get rid of loyalty cards, and Shaw's and Hannaford's price cutting, are bids to shake up the market. "To this point, everyone was trying to outdo each other in loyalty cards," he said.

Berger said sharp competition that leads to price cuts is good for consumers.

Albertson's, one of the other chains purchased by Cerberus, announced this week that it is ending its rewards card discounts, retreating from a program that is in wide use in retailing.

Many chains -- including drugstores, hardware and sporting goods stores -- use the cards to build customer loyalty, with special offers and discounts for card holders.

Shaw's program ends Friday. It required customers to have rewards cards to get sale prices, and apparently was popular, at least with current Shaw's shoppers.

"I love it," said Marissa Gorman of Portland, who shopped Thursday at Shaw's Mill Creek store in South Portland.

Gorman said she kept an eye out for the bright-orange shelf tags indicating deals that were available only to card holders.

(Continued on page 2)

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